My camera (Canon Digital Ixus 55) gives me a choice of ISO50, or 100, or 200, or 400. My father said it was to do with exposure times and image quality dependent on light conditions - but he didnt really explain it to me

What difference does it make - I'm not sure if I even need to touch anything

Its a 5mb camera but when I take piccies the max size I have ever achieved is about 2.2megabytes. Its set at the largest image, but even at the size the pictures can vary in size from 0.8mb to 2.2mb. (Its set at 2592 by 1944)

It also has something called AWB - but again I've no idea what that means

Overall I read many reviews on various sites and this was a highly rated camera - I dont think the picture quality is that great and am wondering if I should have gone for a higher mpixel rate camera

ISO - International Standards Organization, which you don't really need to know about :) ISO ratings of 50, 100, 200 etc. determine the sensitivity of film to light or in this digital age, the sensitivy to the sensor. Basically if you need to shoot in low light you'll want to use a higher ISO setting so that your exposure settings allow you to combine higher shutter speeds with wider apertures for example. For normal day to day shooting anything in the range 50-400 will give you plenty of latitude in your shooting situations. The lower the ISO rating you choose, the better the quality of the image as lower ISOs mean less noise from the sensor which generally speaking is a good thing and something you'll want.

Regarding your file sizes, it could be that you have a camera setting for compression and this would also affect the quality of the images you see if that setting is too high. If the ISO setting is way up high this will also affect the quality of your images by the introduction of noise (specks of the wrong color in your image). Also, the number of different colours being recorded in the images could affect the file size - if there is a lot of the same colour of blue for example then the compression algorithms for jpegs will work very effectively so that the individual RGB values for each pixel won't need to be stored so the file size will come down. If you can shoot in RAW mode (i.e. capturing everything from the sensor without any camera manipulation) I'm sure you'll see 5MB images (I'm not that familiar with the Ixus so bear with me).

AWB - Auto White-Balance. This controls the colour of the light being recorded in your various shooting conditions- sunny, cloudy, tungsten, etc.

The Ixus range are very well respected for their versatility and the quality of the images produced from such a compact camera. At a guess I suspect that the reason you aren't too enamoured with the results is because of the current settings on the camera. Try resetting the camera back to the factory defaults and have another go.

Just on the size thing...
It's a 5 mega pixel camera (not byte) and the size of the files doesn't represent the size of the photograph.
You're pictures will always have 5 million pixels but depending on the content, and as already said, the file size can vary greatly.

Even RAWs vary, my 6MP camera will produce raws varying from just under 5Mb(ytes) to over 6.5.

For ISO, there's a brief explanation (and more on other topics) that's quite good here:
http://www.photonhead.com/

Have a play with the simcam and I'm sure everything will click:
http://www.photonhead.com/simcam/filmspeed.php

Thanks for the responses
I now understand the ISO numbers

I'll have to look at the camera to see about image quality, but I'm already thinking of giving it to my sister - then I'll have another think about different camera's

Could you post a sample image and describe why you're not happy with it.

I'll find something suitable - will post tomorrow morning